In 2023, markets grappled with the Russia-Ukraine war, the Israel-Hamas war, peak global inflation, rising crude prices, peak US 10-year yield, and consumption slowdown. Yet this year, the Nifty has gained 18.3 per cent, the Nifty Midcap 100 by 45 per cent, and the Nifty Small Cap 100 by 54 per cent.
The note said that although the Foreign Portfolio Investors (FPIs) set forth their conviction in the Indian capital market by infusing Rs 1.14 trillion in equities year to date (YTD), the retail category (via Systematic Investment Plans (SIPs)) was not behind and invested Rs 1,07,240 crore in the first seven months of this fiscal.
“I don’t think we or any other part of the world is in the sweetest spot as we are currently experiencing many things that have been happening globally, specifically towards India,” said Jaideep Hansraj, CEO of Kotak Securities.
The brokerage said several factors in the next few months would set the tone for the global and Indian markets in the first half of next year.
This includes the duration and magnitude of peak interest rates in the US and other developed economies and a likely revival in India, which may coincide with disruption becoming more visible in a few consumption sectors like autos and paints. And the upcoming general elections in mid-2024.
The brokerage said it prefers mega-caps due to their reasonable valuations and greater immunity in the event of any negative developments in the next few months.
“The mega-caps are in a bear market, with many large-cap stocks delivering modest positive or moderate negative returns in the past 2-3 years. The large and high-quality mid-caps are in a bull market. The report said that the weak operating performance in the short term and likely deterioration in fundamentals in the medium term is largely ignored by the market,” the report said.
The report further said the low-quality mid-caps and small-caps are in a bubble market, with the market attaching unrealistic narratives to many stocks.
When asked about going for a conservative Nifty target, Shrikant Chauhan, head of research of Kotak Securities, said a lot of tailwinds have been priced in at the moment.
“If good things are priced in, it’s a matter of concern. Right now, a lot of things are priced in. We have to see what new triggers are going to come for Indian and global markets, and based on that, we can increase our targets. Right now, we are of the view that markets are going to consolidate,” said Chauhan.
“There are multiple asset classes available right now as compared to 2008. And that’s the reason we are targeting Nifty levels based on 18 times FY26 earnings per share. If we see more expansion, if FPI buying comes, or if we see global or Indian macro support, we will see Nifty higher,” Chauhan said.
Kotak Securities is expecting a bull case scenario of Nifty ending at 24,260 and a bear case scenario of 19,408 by the end of 2024.
First Published: Dec 18 2023 | 6:45 PM IST
